Boeing 787 Groundings Traced to One-of-a-Kind Technology

A US Airways Group Inc. airplane takes off past a Boeing Co. 787 Dreamliner on display during its global Dream Tour at Reagan National Airport in Washington, D.C., U.S.. Photographer: Andrew Harrer/Bloomberg

Jan. 17 (Bloomberg) -- Boeing Co.’s 787 Dreamliner, the
planemaker’s most advanced jet ever, is in trouble because of
the technology that sets the aircraft apart from its peers.

The U.S. Federal Aviation Administration ordered yesterday
that 787s in the U.S. be grounded until their batteries are
shown to be safe, the first such action since 1979. The move
came hours after two Japanese airlines parked half the world’s
Dreamliners following a battery fire and an emergency landing.

Boeing’s plight stems from choices it made years ago to
push the boundaries of aircraft design in a bid to boost fuel
economy. The 787 uses unprecedented amounts of electricity, five
times as much as in conventional jets, so less power is diverted
from the engines to run on-board systems. Boeing depends in part
on lithium-ion batteries, which provide quick, powerful charges
and can also overheat and catch fire.

“These aren’t minor issues -- it isn’t a matter of a
coffee maker going on the fritz or the in-flight entertainment
system not working as expected,” said Henry Harteveldt, an
aviation analyst at Hudson Crossing in San Francisco. “It could
be expensive and lengthy to fix the problem.”

The Dreamliner already was the focus of a special FAA
review triggered by last week’s fire on a Japan Airlines Co. jet
at a Boston airport gate. FAA officials certified the plane
before it entered service in late 2011 and said last week that
while they considered the plane to be safe, they wanted the
evaluation to remove any doubts.

Emergency Landing

Fresh questions surfaced yesterday after a battery-fault
warning on an All Nippon Airways Co. Dreamliner in Japan forced
an emergency landing, and at day’s end in Washington, the FAA
issued its airworthiness directive.

United Continental Holdings Inc., whose six Dreamliners
make it the lone U.S. operator so far, pledged immediate
compliance with the FAA, which didn’t say what corrective steps
are needed or how long they may take. Christen David, a United
spokeswoman, declined to comment on any costs that might result
from repairs or passenger rebookings.

Japan’s Transport Ministry said it also would order a
grounding, while Indian aviation regulators said Air India will
park its fleet of six 787s. There are 50 Dreamliners in service
worldwide, according to the FAA, whose grounding directive was
the first for an entire model in almost 34 years, after a DC-10
crash in Chicago killed 271 people.

Boeing’s Response

The moves are a blow to Boeing as Chief Executive Officer
Jim McNerney works to increase deliveries, trying to shed the
weight of more than three years of Dreamliner delays. Boeing is
set to double 787 output this year, to 10 planes a month, to
help fill remaining orders for about 800.

“We are confident the 787 is safe and we stand behind its
integrity,” McNerney said in a statement. “We will be taking
every necessary step in the coming days to assure our customers
and the traveling public of the 787’s safety and to return the
airplanes to service.”

Boeing rose 1.2 percent to $75.26 at the close in New York,
after two people familiar with the matter said the FAA was
investigating whether defective batteries from the same batch
were responsible for the Dreamliner incidents. Yesterday, the
stock dropped 3.4 percent, the biggest decline for the Chicago-based planemaker since June 1.

The shares have yet to recover from the slide that set in
when Boeing disclosed the first of seven delays in the 787’s
initial delivery. Through yesterday, the stock had fallen 27
percent since the day before that October 2007 announcement.

Boeing Finances?

“There’s no impact as of now” to Boeing’s finances, Chaz
Bickers, a company spokesman, said by e-mail when asked about
the FAA’s action. “But it’s too early to know more than that.”

He declined to comment on any Boeing contracts with
customers.

A relatively quick repair without design changes would
minimize any pressure on the shares from the FAA grounding, said
Janna Sampson, who helps manage more than $3 billion, including
Boeing stock, for OakBrook Investments LLC in Lisle, Illinois.

“There is a chance that this will be a problem difficult
to diagnose or one that requires a substantial redesign to
fix,” Sampson said today by e-mail. “In that case, the delays
in production may be significant and the impact on Boeing will
be greater.”

The grounding “could pose new operating and financial
pressures for Boeing, including further delay in delivery
schedules and future order flow, as well as ongoing reputational
risk,” Senior Vice President Russell Solomon said in a note.

Fuel Savings

Above all else, the 787 was designed to conserve fuel, the
largest cost for airlines. Boeing promises a 20 percent gain in
fuel efficiency over comparably sized planes.

Lightweight composite materials, the greater use of
electrical power, wings with improved aerodynamics and new
engines all help shave fuel burn compared with the Boeing 767
that the Dreamliner replaces, said Hans Weber, the CEO of
aerospace consultant Tecop International Inc. in San Diego.

Boeing lists a range for the 787-8 model, the first to
enter service, of 8,200 nautical miles (15,200 kilometers). It
seats as many as 250 passengers, retails for $207 million and is
aimed at airlines that want long-haul nonstop routes without
resorting to a bigger 777 or a 747 jumbo jet. Japan Airlines,
for example, has a 787 serving Boston and Tokyo.

‘Pioneering Effort’

“The 787 is a pioneering effort by necessity,” Weber
said. “The plane is very tightly designed to what Boeing’s
perception is for the future of the market.”

Electricity on the Dreamliner powers the usual needs, such
as instruments and air conditioning, as well as new touches that
include dimmable windows in place of traditional pull-down
plastic shades. Boeing also opted to turn to electricity for
functions such as de-icing the wings.

The electrical content is unique to the 787, shunning
traditional power systems that rely on hot, high-pressure air
bled off the engines. Boeing said its approach extracts 35
percent less power from the engines than conventional pneumatic
systems, so the extra air goes to produce more efficient thrust.

“The lithium-ion battery was the right choice given the
design constraints that we had,” Mike Sinnett, Boeing’s 787
chief engineer, told reporters last week on a conference call.

“It doesn’t mean that it was the only choice. It means
that it was the right choice.”

Dreamliners carry the batteries in electronics bays in
their bellies. Sinnett described the units as “something that’s
one and a half to two times bigger than your car battery.”

Battery Supplier

The lithium-ion batteries are made by Tokyo-based GS Yuasa
Corp. and are part of an electrical power conversion system
built by France’s Thales SA. United Technologies Corp.’s
Aerospace Systems unit supplies the overall system, which uses
1.45 megawatts of electricity, enough to power 400 homes.

Resolving the electrical questions would restore the luster
that drew airlines to the Dreamliner in the first place, from
fuel savings to more-comfortable cabins, said Hudson Crossing’s
Harteveldt. The trick will be in successfully making changes to
a plane with an array of technological firsts, he said.

“Don’t underestimate the complexity of the Dreamliner,”
he said. “This isn’t like taking your laptop to the computer
repair shop and getting a phone call the next day. This is not a
quick fix.”